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Now Steve Is Running to Revive Forbes

Steve Forbes has a really good job. As president and editor in chief of Forbes, he writes a column, appears on television and meets with world business leaders. The lobby he enters is encrusted with treasured family objects and his office is up a set of marble stairs. But no one plays ''Hail to the Chief'' when he enters the room.

After running for the Republican presidential nomination, showing up every day at a family-owned media company might seem like a bit of a comedown.

''It's easy,'' he said, offering the frozen smile that was a fixture during his two campaigns for the presidency. ''It would be one thing if I'd been in the White House, but I wasn't. Running something you spent your whole life building is exciting.''

While pushing a flat tax to an apathetic electorate is no day at the beach, Mr. Forbes now confronts the biggest challenge to the family business since the Depression. Forbes, which became one of the richest magazines in America by serving as a totem for conspicuous wealth, is a little short these days. It has fallen to third in ad pages in its category, after leading Fortune and Business Week for most of the 1990's, according to the Publisher's Information Bureau. It has lost almost half its advertising pages the last two years, and newsstand sales, a measure of current consumer interest, were down almost 14 percent in the first six months of this year compared with the corresponding period last year.

The Forbes dynasty, composed of four sons and a daughter of Malcolm S. Forbes, is hardly bereft, but there are significant signs of stress. The company's generous 401k plan, which had provided a 2-for-1 match for employees, was discontinued earlier this year, and some of the family's lavish collections -- including Lincoln's final address as president -- have been auctioned in the last year, raising $30 million. Senior management has taken a significant pay cut, and the company has engaged in modest layoffs, a rare event at Forbes.

As a private company, Forbes Inc. does not disclose profits and losses. But Steve Forbes said that the company's prudence should not be mistaken for panic.

''Everything that we have been doing in the last year is in response to an environment, a falloff that hasn't been seen since the 30's,'' Mr. Forbes said. ''No one is immune. We write about that all the time.''

He points out that ads for July were up 20 percent over the previous year and maintains that the auctions at Christie's were part of an orderly disposal of his father's collections and have nothing to do with a need for cash.

During his runs for the Republican nomination, Mr. Forbes had relinquished control of the company to his brother, Timothy C. Forbes, and the return of Steve Forbes has led to some confusion around the company. Even William Baldwin, who became editor in 1999 after replacing the venerable James Michael, who had been in the post 37 years, said that he was not sure which brother has ultimate authority.

''I couldn't tell you which one runs the company,'' he said.

It had been reported that Steve Forbes, who was bequeathed a majority of the voting and capital stock by his father, had relinquished control by selling shares to his family to finance his campaign. But in an interview, Steve Forbes said that he remained in control of the majority of the voting stock in spite of spending almost $70 million on his two campaigns. (A company official confirmed that Steve Forbes had raised money through sales of nonvoting stock.) Timothy Forbes has returned to his role as chief operating officer and controls much of the day-to-day operations of the company. Robert L. Forbes is vice president of Forbes and president of Forbes Global and Forbes FYI. And Christopher Forbes, known as Kip, is a vice chairman and is responsible for the advertising and promotion departments of Forbes. Their sister, Moira Mumma, has no operational role in the company.

Timothy Forbes, whose affability and erudition make him a popular figure at Forbes, said that the magazine has endured endless cycles throughout its history and has prospered through all of them.

''There is a tyranny to the present, and the value of history is that you are able to get some perspective,'' he said. ''We will ultimately thrive.''

During its heyday, the magazine was closely identified with Malcolm Forbes, who cut a swath through button-down business culture by making profligacy seem like a virtue. Before his death in 1990, his gold-plated gallivanting on motorcycles, hot air balloons and the Capitalist Tool -- the lavish corporate jet -- came to embody the Forbes brand, an unapologetic ode to the good life and the political and economic system that produced it.

After his death, his four sons oversaw a decade of growth, but the magazine's status as an independent family-owned property in an age of publishing behemoths and an increasingly competitive environment in business journalism has wiped out profits, which approached $25 million to $30 million a year in the late 1990's, according to executives with knowledge of the current financial situation.

Monie Begley Feurey, a Forbes spokesman, said: ''Whoever said that could have no clue one way or the other because it is a private company.''

Forbes is hardly alone in scrambling to come to grips with a downturn. Some of the new generation of business magazines that cropped up during the technology boom are gone, and both Business Week and Fortune, its two main competitors, have suffered as well. But Forbes, which had always eschewed trends in its coverage, stumbled more deeply, possibly because the magazine gave particularly lavish -- and some say slavish attention -- to the technology, energy and telecommunications companies of the moment.

''Forbes was early on this story and is more investment-oriented than the other two business magazines,'' said George Gilder, editor of The Gilder Technology Report and co-sponsor of a conference with Forbes. ''Since above all, the tech story was an investment story, they got hit harder than the others.''

Dynegy, among others, was still getting generally positive treatment in Forbes after it became clear it had problems. Mr. Baldwin said the magazine did many tough stories on stock market irrationality in 2000.

''On some stories, we weren't skeptical enough. On others, we were probably too skeptical,'' Mr. Baldwin said. ''In general, I don't think that we were acting out of character.''

Forbes's own investment in the Web never yielded a public offering and has been a significant drain on profits. In spite of its staff of over 75 and a commitment to breaking news, Forbes.com has almost exactly the same number of unique visitors a month -- two million in July, according to Media Metrix -- than the much less expensive Fortune site generates. Forbes is about to sign a deal with Fortune's parent company, AOL Time Warner, to be carried on AOL, according to an executive at AOL, in order to bolster traffic.

Brand extensions like Forbes FYI, a lavish lifestyle magazine, and Forbes ASAP, a technology magazine, have failed to produce any significant profits, according to Forbes executives. The magazine continues to expand globally, with local language editions in Japan and Brazil, and James S. Berrien, president of the Forbes Magazine Group, said that the company will have a total of six local language editions in next 12 months. But the profits, and the fortunes of the family, clearly depend on the biweekly business magazine, which has a rate base -- the number of readers promised to advertisers -- of 900,000.

The expansion has taken place at a company that is selling much fewer ads and is doing so at deeply discounted rates, according to two salespeople at the magazine. With declining margins and lower gross revenues, what had been a dynamo throwing off tons of cash has slowed to a crawl.

Mr. Berrien said the magazine's lead in readership among chief executives has helped produce a summer of much improved ad sales. He added that the magazine's television show, ''Forbes on Fox,'' has been a hit and helped the company sell large ad deals.

The company is not down to its last nickel. A few months ago, it took advertisers and reporters out for a cruise on the Highlander, the company's luxurious yacht. In between helicopter rides, which landed on the boat to take guests for an aerial tour of Manhattan, Steve and Timothy Forbes chatted with guests, reminding them that the magazine was all business before business was cool.

Although the sons have little of the father's flamboyance, they seem to share his vision of a country, and a magazine, that will prosper over the long haul.

''My father grew up in the Great Depression and he was instrumental in putting the magazine into the big leagues,'' Timothy Forbes said. ''He was an essential optimist and that was born of the experience of what he was able to accomplish. I think right now, he'd say, 'Don't let the present overwhelm your sense of the possibilities of the future.' ''

Correction: August 27, 2002, Tuesday An article in Business Day yesterday about the financial decline at Forbes magazine misspelled the name of a former editor who held the post for 37 years. He is James Michaels, not Michael.